If you are interested in buying and profiting from short sale properties, you have many options. The most common is to flip the property. For example, buy a single family home, make needed repairs, and relist the home for sale. An alternative is to rent the property. If this is your first choice, you may consider allowing the borrowers or current home occupants to rent, but is this a good idea? It depends.

How much would you charge for rent? What you must remember is how you were able to buy the property. The borrowers were unable to afford their mortgage payments. What makes you assume they could afford monthly rent and utilities? The goal of profiting from short sales is to make money as quickly as possible. This means charging a fair value for rent. If average rental rates in the area are $900 a month for a single-family home, can they afford? If they were unable to pay similar mortgage payments, you got your answer. Either resell the property or find a tenant who can pay.

Average rental rates in the area. As previously stated, if it is common for a single family home to rent for $900 a month plus utilities, charge that much. Yes, a sob story may tug at your heart and you may want to do your good deed for the year, remember your goal. That is to make money. Truthfully, there are many families in need of a home. You can find a tenant who is willing to pay fair rental rates. Chances are, they have a heart tugging story too.

The current property state. Typically, properties are in better condition with short sales than foreclosures, but there are no guarantees. Commonly, borrowers suggest short sales. They want to avoid the damaging consequences of foreclosure and bankruptcy. These individuals take pride in and care for their home. They just can’t afford it any longer. When inspecting the property, how does it look? If you notice holes in the walls, torn furniture, and other small but costly damages, think about the added costs. If they are willing to “destroy,” the property when being the legal owners, what would happen if they were just renters?

So, should you let a borrower rent your recently purchased short sale property? It depends. The decision is yours to make. With that said, remember the quickest way to profit is from flipping. Unless you are able to purchase a low-priced property, have experience in the rental industry, or purchase property in an area where rentals are in high demand, reselling is your best option. These are less risks and the profit arrives sooner.

The only exception to the above mentioned factors you should take into consideration is with multi-family homes. Unfortunately, renters are left in a pinch with the high rate of foreclosures. Most pay their rent on time. It is the landlords and property owners that make poor financial choices. Some renters are literally having their money stolen from them, as it should go towards paying the rental unit’s mortgage, but it does not. If you have the option to purchase a multi-family or single-family home with paying tenants, keep it that way. In a couple of years, you recoup your expenses and make a profit but without the hassle.

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If you own and rent just one piece of property you are consider a landlord. property owners have the potential to make money and a lot of it, especially when the right cards are played. Are you making money now from your rental properties? Would you like to make more? You can with foreclosure short sales.

Short sales are an alternative to foreclosure. The decision to offer the property in the form of a short sale is made by both the borrower and the lender. Everyone needs to be in agreement because less than the outstanding mortgage amount is sought. For example, if a borrower owes $20,000 on a $45,000 home, the property may be listed for sale at $15,000. Some lenders try to get as much of their money as possible, while others want to unload the property as quickly as possible. This means there is always the potential to make money.

So, why should you, as a landlord, closely examine foreclosure short sales?

1 – Wide Range of properties to Choose From

The poor economy has everyone in a pinch. With a high rate of unemployment and a troubling economy, many homeowners are unable to make their mortgage payments. Soon their debt is spinning out of control.

Right now, you may be running a profitable rental business, but not all landlords are. Due to non-paying tenants, empty units, and poor financial choices, some landlords are finding themselves in or nearing foreclosure.

This means you will find a wide range of properties for sale in the pre foreclosure stages, often available as short sale properties. All of these properties, including single-family homes, can be purchased, renovated, and rented.

2 – Get a Good Deal

As previously stated, short sales are alternatives to foreclosure. They involve selling a property for less than the outstanding mortgage amount due. Why do borrowers and lenders agree to short sales? Because it is much better than foreclosure. Borrowers do not suffer damaging consequences to their credit and most are able to avoid bankruptcy. Mortgage lenders get their money faster, even though they do accept a lower amount. They also avoid lengthy and costly foreclosure proceedings.

Since both mortgage lenders and borrowers are willing to accept less money for the home, there is the potential to get a good deal. By looking in the right places and bargaining with all lenders directly, you can get an amazing deal on any type of property.

foreclosure short sales often result in a good deal, but always proceed with caution. homes do depreciate in value in a poor market. Ensure the short sale price is significantly below the home’s appraised value.

3 – Easy to Turn a Profit

Most buyers of foreclosure short sale properties are first time homeowners or investors. These investors buy a home and resell it. You do have this option, but use your experience as a landlord to make a profit. Consider the long-term aspect. By finding a low-priced short sale property, you can turn a profit in no time at all. For example, if you are able to purchase a 2-family home for $20,000 and rent out those two rental units for $800 a month each, the rental units pay for themselves in just 13 months. After that, you profit.

4 – Easy Way to Expand Rental properties

If you are a successful landlord who is already making a profit or in good financial standing due to your rental properties, you may want more. Unfortunately, the poor real estate market makes that difficult. Many homeowners try to sell their home as soon as they notice a problem. They know that foreclosure may be months away. Unfortunately, most of these property owners have unrealistic expectations. They not only want to get out from their current mortgage, but make a profit. In most cases, that will not happen. You and all buyers know, the less you spend the more money you make.

For landlords, foreclosure short sales are an easy and affordable way to expand a rental property business.

5 – Bargaining Power

If you are like most Americans, you may need financing to purchase a short sale property. Since you are an established landlord, you are at an advantage. Not only should you have decent credit and adequate cash flow, but you have bargaining power. Not only approach lenders about buying a short sale property, but financing the mortgage directly through them! This is a win win situation. Sell yourself. You have experience buying properties, making repairs, finding quality tenants, and paying your bills on time. Remember, mortgage lenders want to avoid foreclosure proceedings at all costs. This leaves you with the power to bargain.

Do you want to profit from the current state of the real estate market? For most homeowners and buyers, this is not the time to buy or sell. But, if you have the needed financial resources and are able to buy, this is the perfect time for you. Not only can you get low priced properties, but you can easily turn a profit. You can do so with flipping. You buy a foreclosed or short sale home, make needed improvements, and resell it.

As previously stated, you can buy these cheap properties as foreclosures or short sales. Of course, you want to examine foreclosures. These properties can usually be purchased for dirt cheap. Unfortunately, foreclosure isn’t pretty. It can take months, there is a lot of competition at fast paced auctions, and you may be left with home occupants who refuse to leave the home unless by force. If you are new to buying real estate, foreclosures may sound like more trouble than they are worth. Truthfully, they can be. That is why you should consider short sale properties.

Short sales are foreclosure alternatives. Borrowers cannot afford their mortgage payments any longer. Foreclosure will happen. The only question is when. As previously stated, foreclosures aren’t pleasant. Complications arise for everyone involved. For mortgage lenders, they are costly, full of hassle, and time consuming. For borrowers, they are embarrassing and damaging to ones credit. To avoid foreclosure, a short sale is decided on. This is when the lender agrees to sell the home for less than the outstanding mortgage. For you, this should mean a steal!

Short sales involve selling a property for less than the outstanding mortgage amount due. Typically, this means a great deal, but all buyers must proceed with caution. Unfortunately, many homeowners are now finding themselves underwater. This is due to the poor real estate market and economy. Homes are depreciating in value. A home valued at $400,000 in 2003 might have been a steal at $350,000, but now that home may only be valued at $275,000. In these instances, these homeowners are underwater. They owe more on their mortgage than it is worth. Not only can they not afford their mortgage, but they lose money no matter what.

So, what do underwater homes have to do with short sales? Nothing good. Short sale homes are sold at less than the outstanding mortgage. If the homeowner owes more than the home is worth, you, as a buyer, will not get a good deal. That is why caution is advised. Most mortgage lenders and real estate agents will take the home’s appraised value into consideration, but not all do. You must first receive the home’s appraised value before agreeing to a short sale or making an offer. Short sale properties should result in a good deal. For that good deal to happen, pay less than the fair market value.

In short, the only way to tell if you are getting a good deal with a foreclosure short sale is to compare the selling price with the home’s appraised value. If they are even, rethink your decision. If buying a new home, no harm will come from paying fair market value. On the other hand, if your goal is to turn a profit with flipping, bargain or move on. The less you pay, the more money there is to be made.